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What Are Your Civil Rights After Receiving a Bad Check?

Business Law

Posted: March 3, 2008 6:39 p.m.
Updated: May 1, 2008 5:02 a.m.
 
First, it is a crime to pass a bad check. It is a misdemeanor punishable by imprisonment in the county jail for not more than one year, or in the state prison.

The law governs your civil remedies for the return of a check with insufficient funds, including treble damages, and service fee (up to $25 or $35 if more than one, plus the cost of mailing). NSF or "pass a check on insufficient funds" means (A) lack of funds or credit in the account to pay the check; (B) the person who wrote the check does not have an account with the drawee or (C) the person who wrote the check instructed the drawee to stop payment on the check without good cause.

A person shall not be liable for the added fees or treble damages if they stop payment in order to resolve a good faith dispute with you or if the bad check was due to an error on the part of their financial institution. A "good faith dispute" is when the drawer had a reasonable belief of his or her legal entitlement to withhold payment including services were not rendered, goods were not delivered, goods or services purchased are faulty, not as promised, or otherwise unsatisfactory, or there was an overcharge.

To collect triple the amount of the check, you must make a written demand for payment by certified mail to the person who had passed a check on insufficient funds. That demand must inform this person of (A) the provisions of this section, (B) the amount of the check and (C) the amount of the service charge and cost of mailing.

The person who had passed a check on insufficient funds shall have 30 days from the date the written demand was mailed to pay the amount of the check, the amount of the service charge payable to the payee and the costs to mail the written demand for payment.

If this person fails to pay in full the amount of the check, the service charge payable to the payee, and the costs to mail the written demand within this period, this person shall then be liable instead for the amount of the check, minus any partial payments made toward the amount of the check or the service charge within 30 days of the written demand, and damages equal to treble that amount, which shall not be less than $100 nor more than $1,500, but that person shall no longer be liable for any service charge for that check and any costs to mail the written demand.

If no payment is received, your can now sue the payee for treble damages up to $1,500 above the check amount, as well as the cost the file the case and serve the papers. If the value of the case is under $5,000, Small Claims Court is generally the preferred method. If above that amount, please consult an attorney. Also, you can also contact the local law enforcement agency and/or City Attorney's Office to file a criminal complaint by providing the above documentation.

Kevin Yeam is an attorney in Santa Clarita specializing in insurance claims and civil litigation. "Business Law" appears Fridays and rotates between members of the Santa Clarita Valley Bar Association. www.SCVBar.org.


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